Wednesday, December 09, 2009

In his assessment of the still fluid-and-fuzzy Senate health care compromise, I believe that the estimable David Herszenhorn misrepresents the rationale for the public option (though perhaps capturing the rhetoric and emotion of many supporters):

Supporters of the public option want it to remove the profit motive as an obstacle to medical care, and also to menace the private insurance companies that they generally view as greedy and mean. At times, some lawmakers seemed to favor the public plan simply because private insurers hate the idea.

The point of the public option is not to punish or necessarily weaken the private insurance industry. A strong public option would aim its firepower at providers more than at insurers. That is, by tying repayment rates to Medicare rates, it would bring a wider swath of this country's patchwork of health care payments under the aegis of the Federal government. In other words, it would move the U.S. health care market one step closer to monopsony, the sine qua non of universal health care in every country that offers it -- a market in which the government sets the prices (and coverage rules) for all health care services. That ultimately should improve the pricing power of private insurers competing against a public option; for all the industry's cries about "cost-shifting," the net result of increased government pressure on pricing is likelier to be more pricing power for all buyers.

Of course, a strong public option could be the beginning of the end of private insurance as we know it in the United States. Herszenhorn explains how this could happen - with the help of an apparent typo that conflates the fears of opponents and the hopes of proponents:

The fight over the public plan has never been about its short-term impact. Opponents fear it will lead down a slippery slope to a fully government-run, single-payer health system like those in many European countries.

Many of the most ardent supporters hope that it will lead down a slippery slope to a fully government-run, single-payer health system like those in many European countries. But that was not about to happen anytime soon.

A caveat: "many European countries" with successful universal health care have lots of private insurers. But while they don't have single payer, they do have single pricer -- all insurers pay all providers exactly what the government says they will pay for all procedures. And in most cases, the private insurers of primary health care are nonprofit.